Fiscal deficit hits 96.1% but Modi govt confident of meeting target

NEW DELHI: India’s fiscal deficit touched 96.1% of the Budget estimate for FY18 at the end of August as the government kept its foot on the spending pedal to support the economy while revenues came in at their usual modest pace in the opening months of the financial year.

The April-August fiscal deficit is substantially higher than 76.4% for the year-earlier period, data released by the Controller General of Accounts (CGA) showed.

Despite this, the government said it will meet the fiscal deficit target for the year, pegged at 3.2% of GDP, or Rs 5.47 lakh crore. In absolute terms, the fiscal deficit for April-August was Rs 5.25 lakh crore.

On Thursday, the government had announced the borrowing calendar for the second half of the fiscal, maintaining it at the budgeted amount for the fiscal.

“Fiscal deficit as of now, we stick to 3.2%. As of now, confident of meeting the target,” department of economic affairs secretary Subhash Chandra Garg had said while announcing the government’s borrowing calendar.

DK Pant, chief economist at India Ratings, felt the fisc could come under some pressure. “While tax revenue growth can provide some relief, however, it is unlikely to contain fiscal deficit to 3.2% of GDP,” he said, pegging it at 3.46% for the full year.

The fiscal deficit has been higher than in the previous years because of the quick start to spending facilitated by the early presentation of Budget on February 1. With private investment and exports flagging, the role of public spending in bolstering the economy has become even more critical.

The government is considering ways of reviving growth, which slumped to its lowest in three years in the June quarter. The government has already allocated large sums to a few of its key schemes to ensure there was no delay due to funds. Because of these changes, the figure is not strictly comparable with that of previous years when spending picked up pace only in the second half of the year.

Total spending at the end of August added up to 44.3% of the Budget estimate for FY18, higher than 40.5% at the same time last year. Revenue receipts at the same time were slightly less at 27% of Budget estimates at the end of August against 28% in the previous fiscal.

The government has already disbursed more than half the Rs 1.08 lakh crore budget to ensure that the flagship Mahatma Gandhi Rural Employment Guarantee Scheme, administered by the ministry of rural development, does not suffer any funds crunch and past dues are cleared. The department of food and public distribution, which oversees the food security law, has already received nearly 80% of its Rs 1.16 lakh crore revenue budget. Defence has received over 50% of its Rs 3.6 lakh crore budget compared with 36% at the same time last year.

The revenue deficit was 133.9% of budget estimate against 91.7% last fiscal. With this big spending done, the fiscal situation should start to improve as revenues pick up pace in the second half of the financial year. Capital spending is up 20% in the April-August period over last year with highways already utilising 41% of the budget for the fiscal.

Back Loaded RevenuesFinance minister Arun Jaitley said on Thursday that revenue from the goods and services tax (GST) in the first two months had reached the anticipated figure while direct taxes have risen at 15.7% so far. Tax revenues at the end of August were pegged at 27.8% of Budget estimates against 26.6% last year. The overall receipts are lower because of smaller non-tax revenues at 24% of Budget estimates compared with 32.5% last year, largely because of lower dividends from the Reserve Bank of India.

“The decline in the surplus transferred by the Reserve Bank of India, the considerable targets for other communication services and disinvestment, and the low allocation for public sector bank recapitalisation, would curtail the size of any fiscal stimulus that the GoI may announce in FY2018,” said Aditi Nayar, principal economist, ICRA.

The government has budgeted Rs 72,500 crore from disinvestment in the current fiscal. The bulk of tax and non-tax revenues come in the second half of the fiscal.

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